Old vs New Tax Regime — Which Saves More?
Updated June 2026 · VerifiedHow Do the Slab Rates Compare?
Below is a side-by-side comparison of tax slabs under the old and new regimes for Tax Year 2026-27:
| Income Slab | Old Regime Rate | New Regime Rate |
|---|---|---|
| Up to ₹2,50,000 | Nil | Nil |
| ₹2,50,001 – ₹4,00,000 | 5% | Nil |
| ₹4,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹8,00,000 | 20% | 5% |
| ₹8,00,001 – ₹10,00,000 | 20% | 10% |
| ₹10,00,001 – ₹12,00,000 | 30% | 10% |
| ₹12,00,001 – ₹16,00,000 | 30% | 15% |
| ₹16,00,001 – ₹20,00,000 | 30% | 20% |
| ₹20,00,001 – ₹24,00,000 | 30% | 25% |
| Above ₹24,00,000 | 30% | 30% |
Which Deductions Are Allowed in Each Regime?
| Deduction / Exemption | Old Regime | New Regime |
|---|---|---|
| Standard Deduction (Salary) | ₹50,000 | ₹75,000 |
| Section 80C (PPF, ELSS, EPF, LIC, etc.) | Up to ₹1,50,000 | Not available |
| Section 80D (Health Insurance) | Up to ₹1,00,000 | Not available |
| HRA Exemption | Available | Not available |
| Home Loan Interest (Sec 24b) | Up to ₹2,00,000 | Not available |
| LTA (Leave Travel Allowance) | Available | Not available |
| NPS Employer Contribution (Sec 80CCD(2)) | Up to 14% of salary | Up to 14% of salary |
| Interest on Education Loan (Sec 80E) | Available | Not available |
| Donations (Sec 80G) | Available | Not available |
| Professional Tax | Available | Not available |
When Is the Old Regime Better?
The old regime typically saves more tax when your eligible deductions and exemptions are substantial. Consider staying with the old regime if:
- You claim HRA exemption and live in a rented house in a metro city.
- You have a home loan with significant interest payments (up to ₹2 lakh deduction).
- You invest the full ₹1.5 lakh under Section 80C (PPF, ELSS, EPF contributions).
- You pay premiums for health insurance covering self, family, and parents (80D: up to ₹1 lakh).
- Your total deductions exceed the break-even point of ~₹3.75 lakh.
When Is the New Regime Better?
The new regime is beneficial when you have limited deductions or prefer simplicity:
- Your total deductions are less than ₹3.75 lakh.
- You have income up to ₹12 lakh (or ₹12.75 lakh salaried) and pay zero tax due to the rebate.
- You don’t have HRA, home loan, or significant 80C investments.
- You want a simpler ITR filing process with fewer computations.
- The lower slab rates (5% up to ₹8 lakh vs 20% in old regime) offset the lost deductions.
What Is the Break-Even Deduction Amount?
The break-even point is the total deduction amount at which tax under both regimes becomes equal. For Tax Year 2026-27:
| Gross Income | Break-Even Deduction (Approx.) | Recommendation |
|---|---|---|
| ₹10,00,000 | ₹2,25,000 | New regime if deductions < ₹2.25L |
| ₹15,00,000 | ₹3,50,000 | New regime if deductions < ₹3.50L |
| ₹20,00,000 | ₹3,75,000 | New regime if deductions < ₹3.75L |
| ₹25,00,000 | ₹4,25,000 | New regime if deductions < ₹4.25L |
| ₹50,00,000 | ₹4,25,000 | New regime if deductions < ₹4.25L |
How to Switch Between Old and New Regime?
Salaried individuals: Inform your employer at the beginning of the tax year to apply the preferred regime for TDS. You can switch while filing your ITR if your final choice differs.
Business / Profession income: Once you opt out of the new regime, you can switch back only once in a lifetime. Choose carefully.
Frequently Asked Questions
Which tax regime is default for Tax Year 2026-27?
The new tax regime is the default under the Income-tax Act, 2025. You are automatically placed in the new regime unless you opt for the old regime at the time of filing or via your employer.
Can I switch between old and new regime every year?
Salaried individuals (with no business income) can switch between regimes every tax year when filing their return. Taxpayers with business/professional income have a one-time opt-out option from the new regime.
Is the ₹75,000 standard deduction available in both regimes?
No. The enhanced ₹75,000 standard deduction is available only in the new regime. Under the old regime, the standard deduction is ₹50,000.
Do I lose the Section 80C benefit if I choose the new regime?
Yes. Section 80C deduction (up to ₹1.5 lakh for PPF, ELSS, EPF, LIC, etc.) is not available under the new regime. However, your EPF contributions still grow tax-free; only the deduction benefit is lost.
What is the break-even deduction amount for someone earning ₹15 lakh?
For a gross income of ₹15 lakh, the break-even deduction is approximately ₹3.50 lakh. If your total deductions under the old regime exceed this amount, the old regime saves more tax.
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